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>>> US Close Dow -0.20% S&P +0.33% Nasdaq +1.05% Russell -0.22%

Closing Stock Market Summary

The S&P 500 (+0.3%) set intraday and closing record highs on Tuesday, even after the FDA and CDC recommended that states pause use of Johnson & Johnson's (JNJ 159.48, -2.16, -1.3%) COVID-19 vaccine. The mega-caps and growth stocks did the heavy lifting, as long-term interest rates moved lower following better-than-feared CPI data for March.

The Nasdaq Composite outperformed with a 1.1% gain, while the Dow Jones Industrial Average (-0.2%) and Russell 2000 (-0.2%) nearly recouped all of their intraday losses.

Prior to the open, the two federal agencies issued the recommendation due to severe blood clotting in six reported cases out of more than 6.8 million doses, but later suggested in a press conference that the pause would only be for a "matter of days." The vaccine rollouts from Pfizer (PFE 37.17, +0.20, +0.5%) and Moderna (MRNA 149.71, +10.31, +7.4%) were not adversely affected.

There were some concerns that the JNJ mishap would contribute to vaccine hesitancy and possibly slow down vaccination/reopening efforts, but the market didn't overreact to the news. Sure, the cyclical financials (-0.9%), industrials (-0.5%), and materials (-0.2%) sectors closed lower, but losses were relatively tame in front of Q1 earnings from the banks tomorrow morning.

Notwithstanding the vaccine news, the market appeared to default to the monthly momentum leaders, namely mega-cap stocks like Apple (AAPL 134.43, +3.19, +2.4%), Microsoft (MSFT 258.49, +2.58, +1.0%), and Tesla (TSLA 762.32, +60.34, +8.6%).

Accordingly, the information technology sector (+1.0%), the consumer discretionary sector (+1.0%), and Vanguard Mega Cap Growth ETF (MGK 22.39, +2.52, +1.2%) advanced about 1.0%. The utilities sector (+1.2%) was the best-performing group in the S&P 500, though.

A steady decline in long-term interest rates, fueled by a better-than-feared Consumer Price Index report for March and a strong 30-yr bond auction, was cited as a supportive factor for growth stocks. While total CPI rose 0.6% m/m (consensus +0.5%) for its largest monthly increase since August 2012, it was only slightly higher than expected and core CPI was only up 1.6% yr/yr.

The 10-yr yield decreased five basis points to 1.62% after touching 1.70% overnight. The 2-yr yield was unchanged at 0.16%. The U.S. Dollar Index decreased 0.3% to 91.83. WTI crude futures increased 0.8%, or $0.49, to $60.18/bbl.

Corporate updates were drowned out in the flow of today's macro news and mega-cap leadership. Notable stories included Danaher (DHR 242.85, +8.01, +3.4%) providing a strong Q1 revenue outlook, Boeing (BA 253.27, +3.75, +1.5%) delivering 29 planes in March, and Fastenal (FAST 49.98, -0.73, -1.4%) missing revenue estimates.

Reviewing Tuesday's economic data:

Total CPI increased 0.6% month-over-month in March (consensus 0.5%) -- the largest monthly increase since August 2012 -- following a 0.4% increase in February. Core CPI increased 0.3% m/m (consensus 0.2%) following a 0.1% increase in February. On a year-over-year basis, total CPI was up 2.6% unadjusted versus 1.7% in February. Core CPI was up 1.6% following a 1.3% increase in February. Over the last six months, total CPI is up 3.6% at an annualized rate on a seasonally adjusted basis, whereas core CPI is up only 1.4%.
The key takeaway for the market is that this report isn't going to sway the Federal Reserve's thinking that it can sit tight with its accommodative policy since core inflation in particular is still sitting tight below a 2.0% annual rate.

The NFIB Small Business Optimism Index for March increased to 98.2 from 95.8 in February.

Looking ahead, investors will receive Import and Export Prices for March, the Fed's Beige Book for April, and the weekly MBA Mortgage Applications Index on Wednesday.

Russell 2000 +12.9% YTD

S&P 500 +10.3% YTD

Dow Jones Industrial Average +10.0% YTD

Nasdaq Composite +8.6% YTD

WWD : Mariano Puig Planas Dies at Age 94

PARIS – Mariano Puig Planas, a member of the second generation of the Puig family that owns the eponymous Spanish fragrance and fashion company, has died at age 94.

He was a former president of Puig, who spearheaded its international expansion and was instrumental in bringing in the fragrance and fashion businesses of designers such as Paco Rabanne and Carolina Herrera.

Mariano Puig was born in Barcelona in 1927. He earned a doctorate degree in chemical engineering and was a graduate of the IESE Business School in 1964.

He is the father of four sons, including Puig chairman and chief executive officer Marc Puig, and one daughter.

“Beginning in his youth, Mariano Puig stood out for his leadership abilities and a sense for business growth, establishing important ties with the United States, the Caribbean and France,” the company said in a statement Tuesday.

At the end of the Fifties, he sealed a distribution agreement for the Agua Lavanda Puig fragrance in the U.S., then became the representative for the Max Factor brand’s distribution in Spain for more than 15 years.

That experience in the U.S. was followed by Puig setting his sights on another foreign country – France. In 1968 in Paris, he signed a collaboration agreement with Rabanne for the creation of the designer’s perfumes.

In 1987, Puig and Herrera inked an agreement for the production of her fragrances, and that was followed by the purchase of her fashion division in 1995, which he negotiated.

Puig was also a founding member of the Family Business Institute in Spain, where he served as president from 1995 to 1997.

Puig was a member of a number of institutions, including the Spanish Royal Academy of Language Foundation, the Fundación Amigos del Museo del Prado and the University Board of IAE Business School.

As a young man, he served as a member of the Spanish National Water Skiing Team and became the champion of Spain twice in the sport. He was president of the Spanish Federation of Water Skiing and organized the World Championship in water skiing in Banyoles, Spain, in 1971.

Puig received numerous awards, including the gold medal from the Spanish Institute of New York, the Family Business Award from Chicago’s Kellogg University and the Kingdom of Spain Award for his business career, which was presented by King Felipe VI in February 2019.

Puig is survived by his wife, Maria Guasch, and children.

Plans for his funeral service could not immediately be learned.

(DJ) DGAP-Adhoc: Covestro AG: Raised earnings outlook for 2021

Robb Report : Kanye West’s Prototype Yeezys Are Expected to Become the Most Expe

Kanye West’s Prototype Yeezys Are Expected to Become the Most Expensive Sneakers Ever Sold

They could fetch in excess of $1 million.

Sotheby's

The kicks that kickstarted Kanye West’s Yeezy empire may soon be millionaires.

The sneakers, which were the prototypes for the Yeezy line, have just popped up for private sale at Sotheby’s, with a jaw-dropping estimate in excess of $1 million. Developed by the rapper and Mark Smith for Nike, the kicks are billed as the most valuable sneakers to ever appear at the storied auction house and will be offered starting next Monday.

Ye actually premiered the shoes on-stage at the 2008 Grammys where he performed his smash hits “Hey Mama” and “Stronger” and then claimed four of the awards for his own. In the years that followed, West famously collaborated with Nike for myriad Air Yeezy releases before landing a multi-year deal with Adidas in 2013. Now a global phenomenon, the Yeezy brand of sneakers brought in roughly $1.7 billion in sales in 2020 as reported by Forbes.

The sneakers are expected to sell for more than $1 million.Sotheby's

The original Nike Air Yeezy signifies a critical moment in sneaker design, as the kicks were created for an artist rather than an athlete and had an entirely new silhouette. They also originated the coveted line.

“This pair is critical to the development of the Yeezy franchise, which has become one of the most important sneaker and lifestyle brands in history,” Brahm Wachter, head of streetwear and modern collectibles at Sotheby’s, said in a statement. “Debuted on-stage at the Grammys in 2008, the sneakers set off waves in the sneaker community as people tried to identify the mysterious pair. Afterward, we saw a series of collaborations between Kanye and Nike, and then later the birth of his line with Adidas.”

The sneakers come housed in a custom wooden box.Sotheby's

These particular size 12 sneakers, which were fashioned in Nike’s “Innovation Kitchen” in Oregon, feature a soft black leather upper with perforated detailing. They sport a tonal Swoosh on the overlay, along with a Yeezy forefoot strap and the label’s signature “Y” medallion lace locks in pink. The sneakers will also come housed in a custom wooden box emblazoned with a design by Smith.

The kicks, which come courtesy of New York collector Ryan Chang, will likely become the most expensive sneakers ever sold by Sotheby’s. The auction house previously auctioned a pair of 1985 Air Jordan 1 sneakers, designed for and worn by NBA demigod Michael Jordan, for what was then a world-record sum of $560,000.

The Nike Air Yeezy samples will be on display at the Hong Kong Convention and Exhibition Centre from April 16 through 21. Interested sneakerheads can submit offers directly to Sotheby’s. Run, don’t walk.

(ONE) LVMH: Good start to the year for LVMH

(BN) *LVMH 1Q REV. EU13.96B; EST. EU12.7B

FT : Kwarteng puts pressure on Gupta to refinance his steel empire

Kwarteng puts pressure on Gupta to refinance his steel empire

Business secretary leaves open possibility of the UK providing a financial lifeline to save jobs

Kwasi Kwarteng said on Tuesday that ministers would wait and see if Sanjeev Gupta could deliver on his promise to refinance his metals empire before deciding whether to step in.

But the business secretary left open the possibility of the government throwing a lifeline to Gupta’s British steel plants.

Speaking to MPs on the business, energy and industrial strategy select committee, Kwarteng said Gupta should be given time to secure alternative financing after the collapse of his company’s main lender, Greensill Capital.

Kwarteng added that he was in regular contact with the unions and local management at Liberty Steel, the steel operations of Gupta’s GFG Alliance. Liberty Steel is the UK’s third-largest producer, employing about 3,000 people across the country. Concerns have been mounting about the fate of Liberty’s plants since Greensill’s collapse last month.

Kwarteng defended the government’s recent decision to reject a plea by Gupta for more than £170m in emergency funding, saying there were fears the money could have been sent abroad.

“It was the Gupta Family Group that asked for the money, and it’s not the most transparent organisation. It also has assets all over the world and they employ something like 35,000 people all over the world,” he told MPs.

“If the Gupta Family Group asks the British government to give £170m of taxpayers’ money, it’s incumbent on ministers and officials to have some degree of surety that money will stay in the UK and won’t simply be dispersed among the Gupta Family Group’s other steel manufacturing assets across the world.

“As far as I could understand, we didn’t have those guarantees, it was a very opaque structure and there was a reluctance to give the group the money.”

Kwarteng admitted that there was a danger that one of the plants might close but added that he was “very keen” to see “that these assets, which are good assets, continue to operate” and that it was important for Britain to continue to have access to a domestic supply of steel.

Asked what contingency plans the government had in place in the event of a collapse, Kwarteng said it was necessary to work through Gupta’s plans for refinancing the business and examine what local management intended to do before intervening: “Let’s see if [Gupta] can refinance his businesses in the way that he said he would.”

The Financial Times disclosed last month that ministers had drawn up contingency plans to take over the running of the plants in the event of a collapse. The Treasury supported British Steel in the same way in 2019 before it was finally sold to a Chinese group.

Kwarteng was also asked about revelations by the FT last week that GFG had received loans from Greensill based on suspect invoices. The validity of a number of invoices provided by Liberty Commodities, GFG’s trading arm, to Greensill had been called into question by companies named in them.

The business secretary said the allegations were “very serious” and “essentially allegations of criminal behaviour” but added that it was not the place for a government minister to comment.

Download Kwarteng_puts_pressure_on_Gupta_to_refinance_his_steel_empire___Financial_Times.pdf

FT : Air France-KLM: come fly the Balkanised skies

Air France-KLM: come fly the Balkanised skies

The political pressure created by financial strain will continue

Keeping up with the neighbours is a costly venture for France and Germany. Both countries have dug deep in their pockets to help travel groups through the crisis. French measures to keep Air France-KLM in the air continue the one-upmanship. State investment always comes at a price for minority shareholders.

The deal comprises €1bn of new equity and the conversion of €3bn of French government loans into hybrid debt. The loans were part of last year’s larger bailout of the Franco-Dutch airline. Capitalising interest payments will ease cash flow pressures, which chief executive Benjamin Smith puts at about €10m daily.

The Dutch state is notably absent from the deal. Its shareholding will roughly halve. France’s shareholding is likely to double. AF-KLM is becoming even more of a French strategic asset. Private shareholders whose muted demand meant the new equity priced low are right to be cautious.

The Netherlands increased its stake to 14 per cent in 2019 to match France’s holding. The newly-raised funds will only be going to the French arm of the business, which explains the unwillingness of the Dutch to take part. Treating a unified business as separate entities does not bode well for the future of AF-KLM. The airline needs all its backers pulling in the same direction to succeed.

But the political pressure created by financial strain will continue. The company wants to reduce its net debt to below two times ebitda by 2023. The latest financing may only bring it down to three times.

If European travel resumes as hoped, the airline might still need another €2bn of new equity, said Daniel Roeska of Bernstein. Interventionist France is the most likely source. That would further skew the cross-border alliance while making job cuts even harder to accomplish in an environment where politics has ensured overcapacity persists.

Minority shareholders can thank France for forestalling a wipeout. But they should not expect anything other than sluggishness from the stock when the pandemic abates.

Download Air_France-KLM__come_fly_the_Balkanised_skies___Financial_Times.pdf

FT : Activist fund Petrus starts proxy fight at German bank Aareal

Activist fund Petrus starts proxy fight at German bank Aareal

London-based investor seeks to replace 3 members of real estate lender’s supervisory board

London-based activist hedge fund Petrus Advisers has launched a proxy fight at Germany’s Aareal Bank with the nomination of three executives to the real estate lender’s supervisory board.

Petrus owns just under 10 per cent of Aareal and has been critical of the bank’s “excessive and unethical” levels of pay and its return on equity. It has written to Aareal’s management board to nominate Heinz Laber, Marion Khüny and Thomas Hürlimann as replacements for three members of the supervisory board.

“Immediate, joint and prudent strategic action is necessary to ensure the sustainable success of the group for the future,” wrote Petrus in its letter, which was seen by the Financial Times. It was emailed to the company on Monday night and delivered by hand on Tuesday.

“The management board and the supervisory board, in particular the chair of the supervisory board Ms [Marija] Korsch, have failed in this regard.”

The letter sets the stage for a battle at the bank’s annual general meeting on May 18. Activists have often found it hard to agitate for corporate change in Germany, although in February Siemens boss Joe Kaeser praised activists and said company managements would be “well advised to listen to them”. Among Aareal’s shareholders is Swiss activist Teleios Capital, which owns more than 5 per cent of the bank.

Wiesbaden-based Aareal, which has a market capitalisation of about €1.4bn, lends to investors such as institutions and private equity firms purchasing commercial property, including offices, hotels and shopping centres. It recorded a €75m operating loss last year during the coronavirus crisis, having made a €248m profit the previous year. It said it expected to record profits “in a triple-digit million-euro range” in 2021.

Petrus, which has held a position in Aareal for two years, has called on the bank to spin off its 70 per cent stake in consultancy and IT subsidiary Aareon to shareholders by the end of this year, and to develop new sources of revenue.

In February, it criticised the bank’s “palatial headquarters and pensions” and the lack of clarity over the future leadership of Aareal after the bank said in November that chief executive Hermann Merkens would step down for three to four months due to ill health.

Petrus then wrote to the bank’s supervisory board at the end of last month to say that Aareal’s management “is neither willing to nor capable of designing and implementing urgently needed strategic measures” and called for the chair and two other members of the supervisory board to stand down in favour of its own candidates.

But Aareal last week rejected Petrus’s move, saying it was “without any substance” and added that the bank had already made changes to the supervisory board ahead of last year’s AGM.

Aareal said on Tuesday it had received Petrus’s letter and was checking it from a legal perspective. It referred back to its statement last week.

The bank’s share price was hit hard during last year’s coronavirus-driven market turmoil, although the shares have since recovered some of their losses. Over the past three years they have dropped from around €40 to less than €25.

Petrus, which manages about $700m in assets, has agitated for change at companies including Ophir Energy and Flughafen Wien, and last year squeezed a 14 per cent premium from Commerzbank in its purchase of Petrus’s stake in Comdirect.

There were 57 new campaigns launched globally in the fourth quarter, up 128 per cent on the third quarter, according to Lazard. The “Covid pause is over” for activists, the investment bank said in its latest report

Download Activist_fund_Petrus_starts_proxy_fight_at_German_bank_Aareal___Financial_Times.pdf

FT : Toshiba bidding war looms as KKR plans to beat CVC’s $20bn offer

Toshiba bidding war looms as KKR plans to beat CVC’s $20bn offer

Board members of Japanese conglomerate prepare to launch coup to oust its chief executive

KKR is planning to outbid its rival CVC with a buyout offer in excess of $20bn for Toshiba as board members of the Japanese conglomerate prepare to launch a coup to oust the chief executive, according to three people familiar with the matter.

The prospect of a bidding war between rival private equity funds presents Japan with the possibility that the ownership of one of its most famous industrial names could change hands in the country’s biggest ever leveraged buyout deal.

At least two of Toshiba’s biggest shareholders have called upon the Toshiba board to seriously consider any bids from private equity-led consortiums, which would be likely to include a significant Japanese presence to satisfy regulatory sensitivity over a company deeply involved in the nuclear and defence industries.

A Toshiba board meeting on Wednesday is expected to debate a proposal from one of its members that Nobuaki Kurumatani resign immediately as head of a company that he has led since it emerged from financial crisis in 2018. Toshiba declined to comment on the proposal.

People close to the company, whose largest investors include some of the region’s biggest activist funds, said that Toshiba’s senior management had been thrown into “civil war” by the emergence of a preliminary buyout approach last week from the European private equity group CVC — a company for which Kurumatani previously worked as head of Japan’s operations.

But the stakes are about to be raised, with other groups including Brookfield and KKR poised to submit formal proposals of their own, and as CVC prepares to supply more detail on how it would structure a bid on this scale.

Even before CVC submitted its proposal last week, there were signs of growing internal division, with some factions within Toshiba unhappy with the way Kurumatani has dealt with its activist shareholders and the changes he has implemented since taking over in 2018.

In the company’s annual shareholder meeting last year, Kurumatani secured only a 57 per cent support rate for his re-election, and earlier this year his efforts to defeat a shareholder-led proposal failed at an investor vote.

Clashes within Toshiba come as people close to CVC said the Luxembourg-based buyout fund was willing to give majority control of Toshiba to domestic investors to make its $20bn bid acceptable to the Japanese government.

“There is no strong preference for majority control,” said one person close to CVC. “The proposal can be adjusted to its best shape in consultation with the government.”

While most private equity firms prefer to take majority control of companies they are buying, the CVC deal could be structured in a similar way to when a consortium led by US private equity group Bain Capital acquired Toshiba’s chip unit Kioxia in 2018. In that case, Bain held a 49.9 per cent voting stake in Kioxia, while Toshiba and optical products maker Hoya together held the remaining 50.1 per cent.

CVC has told Toshiba that it plans to form a consortium, but it has not made clear who its co-investors will be. People close to the fund said it was open to working with investment funds backed by the Japanese government, such as Japan Investment Corporation, to receive regulatory clearance.

CVC, KKR and Brookfield, which acquired Westinghouse from Toshiba in 2018 after the US nuclear business filed for bankruptcy protection, declined to comment.

Download Toshiba_bidding_war_looms_as_KKR_plans_to_beat_CVC_s__20bn_offer___Financial_Times.pdf